Correlation Between Power Finance and HMT

Can any of the company-specific risk be diversified away by investing in both Power Finance and HMT at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Power Finance and HMT into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Power Finance and HMT Limited, you can compare the effects of market volatilities on Power Finance and HMT and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Power Finance with a short position of HMT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Power Finance and HMT.

Diversification Opportunities for Power Finance and HMT

-0.14

Correlation Coefficient

Power Finance  HMT

Good diversification

The 3 months correlation between Power and HMT is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Power Finance and HMT Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMT Limited and Power Finance is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Power Finance are associated (or correlated) with HMT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMT Limited has no effect on the direction of Power Finance i.e., Power Finance and HMT go up and down completely randomly.

Pair Corralation between Power Finance and HMT

Assuming the 90 days trading horizon Power Finance is expected to under-perform the HMT. But the stock apears to be less risky and, when comparing its historical volatility, Power Finance is 1.03 times less risky than HMT. The stock trades about -0.23 of its potential returns per unit of risk. The HMT Limited is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  7,090  in HMT Limited on October 6, 2024 and sell it today you would lose (368.00) from holding HMT Limited or give up 5.19% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Power Finance  vs.  HMT Limited

Power Finance

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Power Finance are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Power Finance may actually be approaching a critical reversion point that can send shares even higher in February 2025.

HMT Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HMT Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Power Finance and HMT

The main advantage of trading using opposite Power Finance and HMT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Finance position performs unexpectedly, HMT can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in HMT will offset losses from the drop in HMT's long position.

The idea behind Power Finance and HMT Limited pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Insider Screener module to find insiders across different sectors to evaluate their impact on performance.